MAT becoming an attractive deal target

While behavioral health remains a hot market for deals overall, providers that deliver medication-assisted treatment (MAT) will likely see growing interest from buyers over the next three to five years. There are a number of reasons for the optimistic outlook, according Dexter Braff, president of the Braff Group, speaking Thursday at the National Conference on Addiction Disorders in Denver.

“People are desperate to get a foothold in that market,” Braff said.

For one, recent federal and state policy initiatives have created new grant programs to increase the delivery of MAT. Any business that sees an immediate uptick in demand will likely be attractive to buyers and investors.

Additionally, MAT services present a fairly stable price structure across the board with less variation than other options such as residential treatment. Because of the narrow spread, a MAT provider with a managed care contract could be just as attractive as one without.

“In the behavioral health space in particular, the bifurcation in pricing between in-network and out-of-network is huge,” Braff said. “In some cases it’s like $100 versus $2,000. When you have that bifurcation, when you start to narrow that gap, the people at the high end have to come way down. And there’s a lot of fear there.”

But with MAT, the cost of the service might be as simple as $12 a day, he said, and that’s not the kind of cost that will bring attention from insurers. As payers begrudgingly adopt parity policies, MAT is likely to become an attractive alternative as a covered service.

“I don’t think price variation will even emerge if private insurance starts to cover it,” Braff said. “I think they’re going to be at the same rates.”

Braff also noted that margins for MAT providers are now matching or exceeding high-end residential programs, so the market can expect valuations to surge. All of the transactions in 2014 and 2015 in MAT were completed by private equity investors, as platform and follow-on deals, he said.

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